Calderon urges reform: ex-energy secretary says investment restrictions hurting nation.

Recent Cabinet changes have touched one of its most controversial members: Felipe Calderon. On May 31, Calderon resigned as President Fox's energy secretary after his intention to run as the National Action Party's (PAN's) next presidential candidate became public.

One of his last public appearances was at an international forum of the AMERICAN CHAMBER/MEXICO only days before his resignation. There he said that despite the federal government's struggle to increase investment in Petroleos Mexicanos (Pemex), its share capital has been decreasing over the last decade. An investment of US$130 billion is needed to breathe life back into the state-owned oil company, he said.

A historic lack of investment in exploration has sent oil and gas production plummeting from 65,000 mbcoe (millions of barrels of crude oil) in 1992 to 48,040 mbcoe reported for 2003, even as total investment has increased for the last few years. In the short term, it will be difficult for Pemex to increase production. since it can take up to 20 years to develop an oil field.

DOUBLE EDGED SWORD 

While higher world oil prices increase the federal government's income, he said, the cost of imports have been increasing as well. In 2002, the value of oil exports totaled US$14.4 billion. This increased to US$18.4 billion in 2003, but the cost of importing natural gas during the same time period increased from US$3.3 billion to US$3.9 billion.

The former energy secretary said there are several restrictions for the growth of the sector, including legal limits on private sector investment. The lack of refineries in Mexico, he said, means Pemex must use foreign refineries, which greatly increases the price of the final product for Mexican consumers.

Calderon suggested that structural reform is needed to provide investments in the electricity sector, the refinery industry, ducts and in deep-water drilling. Unfortunately, he said, "the legislative situation of the country presents opposition to President Fox in the Senate as well as an unhelpful political environment and a lack of attention to public opinion."

He added that Mexico is losing competitiveness in the gas market as domestic prices increased during the summer of 2003 compared with those in the United States. This increase could force investors to look for alternatives to Mexico. He suggested that the country may need to use more of the liquid natural gas available at very low prices around the world, but an investment in this area is sorely needed to increase production of liquid natural gas at home. He assured the audience the government is working on the development of liquid natural gas terminals around the country, including in Salina Cruz, Ensenada, Lazaro Cardenas. Altamira, as well as other sites.

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Edgar Del Castillo is an AMCHAM business research analyst.